Canada Revenue Agency is facing the loss of a multi-million tax judgment against an oil company because it could not prove it mailed a letter.
The agency was cited by a federal judge after staff of the Calgary Tax Office could not produce a simple date stamp as evidence they’d mailed an assessment under the Income Tax Act.
“Failure to have a date-stamp system strikes me as an example of gross mismanagement,” said MP Murray Rankin, New Democrat revenue critic. Revenue Minister Kerry-Lynne Findlay declined comment.
In reviewing the 2000 tax returns for ConocoPhillips Canada Resources Corp., federal agents concluded the oil giant underpaid its royalties by $4.6 million. Five Canada Revenue officers swore the company was mailed a formal Notice of Reassessment on November 7, 2008.
However Conoco executives in testimony and affidavits said they never received the letter, and unfairly missed a 90-day deadline to file an objection. It was a “vitally important disagreement”, said Justice Douglas Campbell. Conoco filed application asking the judge to quash a decision by the Minister of Revenue that it was too late to challenge the tax bill.
“A thorough search was conducted and no copy of the reassessment was located,” Conoco lawyers told Justice Campbell. In court documents, the company insisted it kept meticulous logs on incoming mail; that its tax director was “well-organized” and had “diligent record-keeping”; and that there was no evidence the 2008 tax bill was ever sent.
“Canada Revenue Agency has not produced an original copy of the assessment, only a print-out marked ‘reproduction’ of a record stored on a Canada Revenue Agency computer,” oil company attorneys noted.
Justice Campbell agreed, concluding tax employees failed to produce “precise evidence” they actually mailed the assessment.
“I would have thought any competent, well-run organization would have a system of being able to verify without need of affidavits the fact that a document as critical as that had been mailed out,” said Rankin, MP for Victoria; “Does this strike you as an example of a competent organization?”
The judge quashed the decision of the Minister of Revenue that Conoco was too late to challenge the seven-figure tax bill, and ordered the Government of Canada to pay the oil company’s legal costs.
Conoco did not comment.
By Tom Korski